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Strategy: concept and process

Strategy is about deciding where you want togo and how you mean to get there. A

strategy is a declaration of intent: This iswhat we want to do and this is how weintend to do it.

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Strategy defined

Strategy is a set of fundamental or critical choicesabout the ends and means of a business. (Child, 1972)Strategy is concerned with the long-term directionand scope of an organization. It is also cruciallyconcerned with how the organization positions itself with regard to the environment and in particular to itscompetitors It is concerned with establishing

competitive advantage, ideally sustainable over time,not by technical maneuvering, but by taking an overalllong-term perspective.(Faulkner and Johnson, 1992)

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Strategy defined

Strategy is the direction and scope of anorganization over the longer term ideally, whichmatches its resources to its changingenvironment, and in particular, to its markets,customers and clients to meet stakeholderexpectations. (Johnson and Scholes, 1993)Business strategy is concerned with the match

between the internal capabilities of thecompany and its external environment.(Kay, 1999)

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Strategy defined

A strategy, whether it is an HR strategy or any otherkind of management strategy, must have two keyelements: there must be strategic objectives (i.e.things the strategy is supposed to achieve), and theremust be a plan of action (i.e. the means by which it isproposed that the objectives will be met).(Richardson and Thompson, 1999)

The emphasis (in strategy) is on focused actions thatdifferentiate the firm from its competitors.(Purcell, 1999)

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Hunger and World Poverty

About 25,000 people die every day of hunger or hunger-related causes, according to the United Nations. This is oneperson every three and a half seconds . Unfortunately, it is

children who die most often.Yet there is plenty of food in the world for everyone. Theproblem is that hungry people are trapped in severe poverty.They lack the money to buy enough food to nourish

themselves. Being constantly malnourished, they becomeweaker and often sick. This makes them increasingly lessable to work, which then makes them even poorer andhungrier. This downward spiral often continues until deathfor them and their families.

Sources: World Food Program (WFP) , Oxfam , UNICEF .

http://www.wfp.org/http://www.oxfam.org/http://www.unicef.org/http://www.unicef.org/http://www.oxfam.org/http://www.wfp.org/

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The concept of strategy

The concept of strategy is based on threesubsidiary concepts:

competitive advantagedistinctive capabilities

strategic fit

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Competitive advantage

Competitive advantage, Porter asserts, arisesout of a firm creating value for its customers.

To achieve it, firms select markets in whichthey can excel and present a moving target totheir competitors by continually improving

their position.

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Competitive advantagePorter emphasized the importance of:differentiation, which consists of offering a product or service thatis perceived industry- wise as being unique;and focus seeing a particular buyer group or product market more effectively or efficiently than competitors who competemore broadly. He then developed his well-known framework of three generic

strategies that organizations can use to gain competitiveadvantage.

innovation being the unique producer; quality delivering high-quality goods and services to customers; cost leadership the planned result of policies aimed at managingaway expense.

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Competitive advantage

A distinction has been made by Barney(1991) between the competitive advantage

that a firm presently enjoys but others will beable to copy, and sustained competitiveadvantage, which competitors cannot

imitate. This leads to the important conceptof distinctive capabilities.

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Distinctive capabilities The opportunities for companies to sustain competitiveadvantage are determined by their capabilities. Adistinctive capability or competence can be described asan important feature that confers superiority on theorganization. Distinctive capabilities are those characteristics thatcannot be replicated by competitors, or can only beimitated with great difficulty.Reproducible capabilities are those that can be bought or

created by any company with reasonable managementskills, diligence and financial resources. Most technicalcapabilities are reproducible

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Distinctive capabilities

Distinctive capabilities or core competences describe whatthe organization is specially or uniquely capable of doing.They are what the company does particularly well in

comparison with its competitors. Key capabilities can exist insuch areas as

technology innovation marketing delivering quality making good use of human and financial resources.

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Distinctive capabilities

If a company is aware of what its distinctive capabilities are,it can concentrate on using and developing them .

It can be argued that the most distinctive capability of all isthat represented by the

knowledge skills expertise and commitment of the employees of the organization.

This belief provides the basis for the philosophy of strategic human resource management.

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Distinctive capabilities Four criteria have been proposed by Barney (1991) fordeciding whether a resource can be regarded as adistinctive capability or competency:

value creation for the customer;rarity compared to the competition;non-imitability;non-substitutability.

The concept of distinctive capability forms the foundation of the resource based approach tostrategy

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Strategic fit

The concept of strategic fit states that to maximizecompetitive advantage a firm must match itscapabilities and resources to the opportunities

available in the external environment. A critical aspect of top managements work todayinvolves matching organizational competences(internal resources and skills) with the opportunities

and risks created by environmental change in waysthat will be both effective and efficient over the timesuch resources will be deployed.

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fundamentals of strategy

Fundamentally, strategy is about defining intentions(strategic intent) and achieving strategic fit byallocating or matching resources to opportunities

(resource-based strategy).The effective development and implementation of

strategy depends on the strategic capability of theorganization, which will include the ability not only to

formulate strategic goals but also to develop andimplement strategic plans through the processes of strategic management and strategic planning.

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fundamentals of strategy

In its simplest form, strategy could be describedas an expression of the intentions of theorganization what it means to do and howThe strategic intent sequence has been definedas:1. a broad vision of what the organization should be;

2. the organizations mission;3. specific goals, which are operationalized as:4. strategic objectives.

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fundamentals of strategyResource-based strategy The resource-based view of strategy is that the strategic capabilityof a firm depends on its resource capability. Resource-basedstrategy theorists such as Barney (1991) argue that sustained

competitive advantage stems from the acquisition and effectiveuse of bundles of distinctive resources that competitors cannotimitate.As Boxall (1996) comments: Competitive success does not comesimply from making choices in the present; it stems from buildingup distinctive capabilities over significant periods of time. Dynamic capabilities - the capacity of a firm to renew, augmentand adapt its core competencies over time.

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The formulation of strategy

Strategic management is the set of decisionsand actions resulting in the formulation andimplementation of strategies designed to

achieve the objectives of an organization.Strategic management means that managers arelooking ahead at what they need to achieve inthe middle or relatively distant future. It deals

with both ends and means. As an end itdescribes a vision of what something will looklike in a few years time.

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The formulation of strategy1. Define the mission2. Set objectives3. SWOT analysis4. Gap analysis

5. Define in the light of this analysis the distinctive capabilities of theorganization.6. Define the key strategic issues emerging from the previous analysis. These will

be concerned with such matters as product-market scope, enhancingshareholder value and resource capability.

7. Determine corporate and functional strategies for achieving goals andcompetitive advantage, taking into account the key strategic issues. Thesemay include business strategies for growth or diversification, or broadgeneric strategies for innovation, quality or cost leadership; or technologicaldevelopment or human resource development.

8. Prepare integrated strategic plans for implementing strategies.9. Implement the strategies.

10. Monitor implementation and revise existing strategies or develop newstrategies as necessary.

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SHRM: concept and process SHRM defines the organizations intentions and plans on how its businessgoals should be achieved through people. It is based on three

propositions:

human capital is a major source of competitive advantage;it is people who implement the strategic plan;

a systematic approach should be adopted to defining where theorganization wants to go and how it should get there.

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SHRM: concept and process

SHRM is a process that involves the use of overarching approaches to the development of HRstrategies, which are integrated vertically with the

business strategy and horizontally with one another.These strategies define intentions and plans related

to overall organizational considerations, such asorganizational effectiveness, and to more specific

aspects of people management, such as resourcing,learning and development, reward and employeerelations.

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The meaning of SHRMSHRM focuses on actions that differentiate the firm from itsCompetitors. It has 4 meanings:

the use of planning;a coherent approach to the design and management of personnel systems

based on an employment policy and workforce strategy often underpinnedby a philosophy; matching HRM activities and policies to some explicit business strategy;

seeing the people of the organization as a strategic resource for theachievement of competitive advantage.

SHRM addresses broad organizational issues relating tochanges in structure and culture,organizational effectiveness and performance,matching resources to future requirements,the development of distinctive capabilities,knowledge management,and the management of change.

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The meaning of SHRM

It is concerned with both human capitalrequirements and the development of processcapabilities, that is, the ability to get things doneeffectively.Overall, it deals with any major people issues

that affect or are affected by the strategic plans

of the organization such as choice of executiveleadership and formation of positive patterns of labour relations.

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Aim of strategic HRM

The rationale for strategic HRM is theperceived advantage of having an agreed and

understood basis for developing approachesto people management in the longer term.Underlying this rationale in a business is theconcept of achieving competitive advantagethrough HRM.

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Aim of strategic HRMThe fundamental aim of strategic HRM is to generatestrategic capability by ensuring that the organizationhas the skilled, committed and well-motivatedemployees it needs to achieve sustained competitiveadvantage.Its objective is to provide a sense of direction in an

often turbulent environment so that the businessneeds of the organization, and the individual and

collective needs of its employees can be met by thedevelopment and implementation of coherent andpractical HR policies and programmes.

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Approaches to strategic HRM

There are five approaches to strategic HRM.resource-based strategy

achieving strategic fithigh-performance management

high-commitment management

and high-involvement management

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High-performance management careful and extensive systems for recruitment, selectionand training;formal systems for sharing information with the

individuals who work in the organization;clear job design;high-level participation processes;monitoring of attitudes;performance appraisals;properly functioning grievance procedures;promotion and compensation schemes that provide for

the recognitionand financial rewarding of the high-performing members

of the workforce.

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High-commitment management the development of career ladders and emphasis ontrainability and commitment as highly valuedcharacteristics of employees at all levels in theorganization;a high level of functional flexibility with the

abandonment of potentially rigid job descriptions;the reduction of hierarchies and the ending of status

differentials;a heavy reliance on team structure for

disseminating information (team briefing),structuring work (team working) and problemsolving (improvement groups or quality circles).

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High-involvement management This approach involves treating employees as partnersin the enterprise whose interests are respected andwho have a voice on matters that concern them. It isconcerned with communication and involvement.The aim is to create a climate in which a continuing

dialogue between managers and the members of their teams takes place in order to defineexpectations and share information on the

organizations mission, values and objectives. Thisestablishes mutual understanding of what is to beachieved and a framework for managing anddeveloping people to ensure that it will be achieved .

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Conclusion concept and process

Strategic HRM is in some ways an attitude of mind that expresses a way of doing things. It

is realized in the form of HR strategies.